Hi, Fellow Fools
Welcome to the “Fab 15 & Friends” Board – Frequently Asked Questions (FAQ's)
written by EID,
Ver 4.0
1. Who opened the “Fab 15 & Friends” Discussion Board, and why was it opened?
Larry Gott requested the board to be opened on October 24, 2003. It was opened because
there was too much Non-China-stock discussion on the China Connection board. We took
a poll, and it was decided to spin off the non-China Fab 15 discussion to another board –
this one.
2. Where did the Fab 15 board get its name?
To start at the beginning … In March of 2003, Larry began taking a hard, methodical
look at fast-growing profitable companies to see if they might be the best kind of stock
to buy. By May, he had invested in 5 such China companies, and 20 such American
companies. Fifteen of the American companies he thought had exceptional potential,
so he called these the Fab 15.
We started discussing these 15 American stocks on the China Connection board, and
when spin-off time came, it was the natural name for the new board. We added “& Friends”,
so we could discuss more than just the 15 stocks.
So, the original “Fab 15” were 15 fast-growing profitable American companies
that Larry had personally invested in.
3. Will we discuss China companies on this board?
No, all the China stocks will be discussed on the China Connection board.
However if Chinese stocks qualify for Fab15 then of course those specific stocks or any
contenders will be discussed.
Here is the link to the C.C. board:
http://boards.fool.com/Messages.asp?bid=116340
4. Give me a short description of the typical Fab 15 stock.
A Fab 15 stock must have:
1) a high rate of revenue growth (above 35% Y2Y) [no exceptions],
many of the Fab 15 have revenue growth rates Y2Y of over 80%.
2) a earnings rate of growth (ROG) normally higher than the revenue ROG [no exceptions],
3) positive and increasing earnings for at least three quarters [exception: might consider two quarters of positive earnings if earnings have increased for four consecutive quarters]
EPS exception example: (0.09) ==> (0.03) ==> +0.02 ==> +0.05
4) an eps rate of growth above 35% (no exceptions)
5) Positive operating cash flows for the last 4 quarters. (no exceptions)
6) Reliable comprehensive reporting of financial results on company website and on major
financial websites such as Yahoo Finance, MSN Money and Reuters.
7) The valuation of the stock shows that it has the potential to significantly increase in
value within the next 12 months.
5. Will the Fab 15 ever change?
Yes, and they have ALREADY changed from the original group.ver.01 that Larry had
invested in March '03, and the original group.ver.02 that we started the board with in
October 03. More changes are occurring all the time.
6. If the Fab 15 stocks are so great, why would they change?
The Fab 15 stocks would change only if:
1) the world changes significantly
2) the economy changes significantly,
3) the market changes significantly,
4) the company changes significantly, or
5) the earnings and revenues results change significantly
6) Future projected earnings are expected to be significantly below the 35% growth rates.
Aside from those reasons, the Fab 15 should always stay the same.
7. Ok, lets put it another way: Why were the companies that were booted off booted off?
(but I repeat myself...)
Primarily because of reason 5: A significant change in revenues or earnings –
usually causing them to fall below one of the Fab 15
benchmarks – having at least 35% Y2Y revenue growth
the last three quarters.
8. Is elimination automatic if a company falls below the 35% benchmarks?
Not necessarily. If a company fell to, say, 35% growth Y2Y one quarter, but guided to a
60% growth Y2Y next quarter, they ought to stay on the list.
9. Who decides whether they stay or go?
Originally, Larry, since the board Fab 15 was a mirror of his personal Fab 15. Things are
more complicated now that he's taken a back seat. We decide things by more of a board
investigation and consensus, and poster EID is the current steward of the realm.
As a rule, there should be very little turnover of the Fab 15.
10. Can we recommend stocks for the Fab 15?
Absolutely! BUT, do your homework first before you recommend a company. Make
sure they qualify using the minimum standards of Question 3 above. Once that is
verified, then we'll investigate further, and discuss.
11. How does the Fab 15 perform compared to the market?
Generally, considerably better.
12. And the Fab 15? Who are they for?
Primarily for LTBH'ers. (Long-Term-Buy&Holders)
13. Would TA (Technical Analysis) help me with the Fab 15?
Yes but we generally only use that outlined in the book “Secrets for Profiting in
Bull and Bear Markets” by Stan Weinstein. This is highly recommended.
We don't usually go into Technical Analysis other than what is outlined in his book.
14. What should I do about Fab 15 stocks with fantastic growth rates that seem
to be stuck in neutral?
I wish I knew. I hope it's a momentary lag, because I'm fairly heavily invested
myself in these 100% growth rate companies. Overall, I trust that the great growth
rate will overcome market inertia.
15. What changes have you influenced since you took over from Larry?
Several changes have been made in 2005 to the fab15 criteria and reporting.
i) The basic criteria was changed to include stocks with growth exceeding 35% in
revenue, earnings and eps.
ii) A flexy plan was introduced meaning that less than 15 stocks may make up
the fab15, but not more than 15, so that only the best growth stocks make up the fab15.
iii) A requirement has been introduced (Feb 2007) to require companies
to have a net positive operating cash flow in the last 4 quarters.
iii) Monthly reports are produced showing year to date percentage returns
for each stock and the percentage returns for each stock since it joined the fab15.
In addition the daily volume in relation to Average volume and the stage cycle
of the stock. This can be stage 1 phasing, phase 2 advancing, stage 3 at top
and stage 4 declining. A full description of these stages is included in the book
“Secrets for Profiting in Bull and Bear Markets” by Stan Weinstein.
iv) Listings of the fab15 provide reference to URLs where up to date
data can be obtained on each stock and its performance as part of fab15
portfolio.
To provide guidance on risk, the risk ranking system used by MSN Money
is provided for ach stock, with 10 being low risk and 1 being high risk.
More details of the risk ranking can be obtained by looking at the risk ranking
in MSN Money.
In all other regards, the criteria and ideas created by Larry Gott remain unchanged.
These changes were made to assist board readers for each fab15 stock and with an
attempt to provide a risk ranking for each stock in the fab15.
16 Are there any other changes envisaged?
I think there is a need to provide more information on the stocks held in the Fab15
portfolio so in future, the lfab15 listings will provide the following information:
1) MSN Money Report reference to give a company report including a risk ranking
(Stock Scouter Ranking)
2) Revenue Statistics reference for each stock disclosing growth statistics by quarter for
revenue, earnings, eps. and last 4 quarters operating cash flow results.
3) Financial History reference to MSN Money website showing actual earnings
in addition, surprises for the fab15 stocks.
4) Cash flow of company as shown on Reuters showing Operating, Investing, and Financial
cash flows and resulting net movement in cash.
5) Earnings Projections reference to MSN Money website showing earnings projections
for coming quarters and next year.
6) Reference to a price check calculator where an up to date stock price can be
determined.
7) Reference to Yahoo Finance target price,statistics and news to provide further
information for readers on the chosen stock. The target price supplies a further check on
what yahoo considers to be the target price achievable for the stock and its current
statistics.
8) Reference to the stock's website where invaluable
information can be obtained on
Investor Relations, Products, Management and conference calls. An invaluable source for
company information.
9) Reference to the company's products and services.
10) Reference to key statistics on Yahoo Finance covering market capitalisation, cash, debt,
margins and other key statistics.
11) Reference to insider trading as disclosed in Yahoo Finance.
12) A risk grade for the company.
In addition information is supplied on the Fab15 notional portfolio with dates and
prices of the stocks in the portfolio with reference to http://www.icarra.com/viewPortfolio.php?id=115
the website that supplies information and charts
on the performance of the fab15 portfolio
and the individual stocks making up the portfolio
For those that do not have a software package for recording and monitoring stocks board
members can try out a package called Personal Stock Monitor Gold
that I have used for 10 years
that does everything you would ever want at http://www.personalstockmonitor.com/purchase.html.
It is highly recommended.
With all this information from various websites, members have access to invaluable
information that can help them with their investments.
17 And finally EID, do you invest in the fab15 and what have been the results?
Like everyone else I do my due diligence and listen to conference calls, look at the
phase a company is in, look at valuation then if I am happy with a fab15 selection
I invest.
You need though to keep an eye on the stages by investing at the start of stage 2
advancing and sell if necessary when the stock begins to fall in stage 4. Companies go in and out
of favor as do sectors and if you do not keep an eye on what is happening a stock can
quickly drop in price and you can lose your hard earned gains. Like others I have
had my ups and downs but has been generally good for fab15.. There has also
been some adverse affects from what appears to be naked shorting on some
highly promising stocks that has affected the stock price and this needs to
be monitored.
And one thing more, don't forget to invest FOOLishly!
EID

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